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Vancouver seniors’ debt rate increase outpaces other age groups

Consumer debt nearly doubles to just under $20,000 in past six years

Four out of 10 Canadians expect to owe money when they retire, a survey has found.

Seniors in Vancouver are accumulating consumer debt at a faster rate than other age groups.

That’s possibly because costs are eroding their fixed incomes or they are using savings to help their children in high-priced Vancouver, say analysts.

Average consumer debt for Vancouverites over the age of 65 has nearly doubled since 2007 to just under $20,000 (by mid-2013), according to data provided to The Vancouver Sun by credit bureau Equifax.

Seniors’ consumer debt growth in Vancouver matches a national trend, but is higher than the national average for seniors, which has risen about two thirds since 2007 to the $12,500-level.

Consumer debt does not include mortgages, but covers all other debt, including credit cards and car loans.

"It's not concerning just yet, because (seniors) are being responsible - bankruptcy rates of seniors are the lowest and they are not increasing - but when you see these types of patterns it's a good idea to watch out," said Regina Malina, director of modelling and analytics for Equifax.

The data had not been analyzed to provide an explanation for why seniors in Vancouver hold more consumer debt than their counterparts across the country, but Malina acknowledged it is possible seniors are taking on debt to help family members.

"This is potentially happening for all the right reasons, and it might work to the advantage of society as a whole," she noted.

Still, the trend should send a warning to consumers, and also to financial institutions and policy-makers, that they should keep a watchful eye on the increasing debt loads, said Malina.

Canadian seniors are living longer on average, and how they will finance their retirement has become a hot topic, particularly as pensions with defined payouts are disappearing.

Not all seniors are taking debt into retirement, but a growing number expect to do so, according to the 2011 Horizons Retirement Report, a survey commissioned by the Vancouver-based Rogers Group Financial.

Four out of 10 Canadians expect to owe money when they retire, the survey found.

Gudrun Langolf, vice-president of the Council of Senior Organizations of B.C., says the rising debt load of seniors is no surprise.

Although she cautioned each senior’s circumstance is different, she noted seniors who have been retired for 20 years or more face rising costs on their fixed incomes, even if they are lucky enough to have a pension or own their own home.

Rising costs cover everything, including energy, insurance and home repairs, said Langolf.

“Every little service it’s another $1 or $2, but put them all together and it adds up, and pretty soon you’re at the low-income level or poverty line,” said Langolf.

She added that most of the seniors she knows are helping their children to some degree. “They are happy to do so, but it’s becoming a burden.”

The rise in seniors’ debt is not matched in other age groups.

Nationally, and in Vancouver, the rate of consumer debt level increase for those younger than 65 has slowed in the past six years. In Vancouver, it declined for 36-to-45 year olds in the first six months in 2013.

Those trends were noted in a Toronto Dominion Bank analysis earlier this year, where the financial institution observed that younger Canadians put the brakes on debt in 2012 while seniors kept borrowing.

However, Toronto Dominion chief economist Craig Alexander said that to get a more complete picture it’s important to realize seniors’ debt loads remain much lower than those in the their middle years.

Toronto Dominion used data from Ipsos Reid’s 2012 Canadian Financial Monitor survey, which showed that average debt held by British Columbians 65 and older was $51,636, while 25-to-44 year olds held $161,077 of debt.

“It’s what you expect from a life-cycle point of view. When you are young, you live beyond your means — you buy your first house, you buy a car, you have a family — and you have to take on debt. And over your working life you pay down debt, save for retirement and then the general way of talking about it is you live on your saving,” observed Alexander.

“I guess one of the things that is surprising is more seniors are carrying debt than ever in the past, and they are holding debt longer,” he said.

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